Ethanol Study Projects More Hikes in Production Costs

A new study from Iowa State University's Center for Agricultural and Rural Development (CARD) says the rapid increase in corn-based ethanol production could cause corn prices to continue their escalation. The CARD study assesses how large the U.S. biofuels sector could become and projects possible impacts on crops, livestock and poultry, exports and food prices. Ethanol production since last August

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A new study from Iowa State University's Center for Agricultural and Rural Development (CARD) says the rapid increase in corn-based ethanol production could cause corn prices to continue their escalation.

The CARD study assesses how large the U.S. biofuels sector could become and projects possible impacts on crops, livestock and poultry, exports and food prices.

Ethanol production since last August has sent hog production costs 30% higher, with similar increases for dairy, beef, eggs and poultry. Those cost hikes have boosted U.S. retail food prices by $14 billion annually.

The CARD study says food prices could rise by $20 billion under a scenario where crude oil prices range from $65 to $70 a barrel and U.S. corn prices reach $4.42/bu.

“Although production costs for pork producers have increased significantly since last summer,” says Neil Dierks, CEO of the National Pork Producers Council, “the most immediate concern remains physical availability of corn for livestock feed.”

The study also suggests U.S. ethanol production could reach 30 billion gallons by 2012, consuming more than half of U.S. corn, wheat and other coarse grain production. This could trigger higher meat prices for consumers, reduced livestock production across the board and even greater reductions in grain and meat exports.